The future of Australian property prices

[tech/a]

How many dd you pick

3 One is still on the net live trading 2002 to 2008

One the crash I picked but didn't take full advantage of.
The other 2 ---- well you only need one.

To topic.
If you can positively gear it then do it.
If it's putting you into debt---don't.

This is a time to reduce debt not increase it.

 

[Julia]

While interest rates were higher, the price of property was much lower, and has been shown previously, the level of income devoted to mortgage repayments now are much higher than when you got to buy.

The price of property was then relatively proportionate to income levels.
Perhaps consider when you state that "the level of income devoted to mortgage repayments are (sic) now much higher than you got to buy", what women earned was massively less than the income of men. Even today, after so much progress has been made in this regard, there is still not equality of income for women for similar work.

And just a couple of questions for those of you who complain so bitterly about how much harder it is for you:

1. Are you and your partner both prepared to work two jobs throughout the week, and then another throughout the weekend, in order to save for a substantial deposit on the first home, and then to pay off the mortgage more quickly? And continue doing this for years?

2. Are you both prepared to do without new clothes (barring footwear and underwear), all travel and holidays, all entertainment, meals out etc, until you reach your goal?

3. When you do finally get that house, are you prepared to have second hand furniture and appliances while you continue to save to pay out the mortgage?

4. Will you postpone having children in favour of continuing the above measures?

The above are just some of the choices we made.

 

[MR.]

The price of property was then relatively proportionate to income levels.

It might be just me, but I don't believe that for a second!

 

[orr]

Your limiting your observation to the topic at hand.

Widen your view and youll note.

(1) The Tech Boom
(2) The 2000-2008 Bull Market.
(3) Gold $250/oz to $1700
(4) The Aussi $ 50C to $1.10
(5) The crash of 2008 (Short!).
(6) Oil $40 a barrel to $125.
(7) Mining boom.
(8) Housing boom of the late 90s early 2000


In the next 30 yrs you'll see many many many more opportunities
just like these. Get one right with enough on it and youll change you life
Financially.



Clearly you've not seen my golf swing!

I'll certainly not dispute the chances at opportunity, Edisons quip in this regard ' opportunities are missed by most people because they're dressed in overalls and look like work'is one I hold dear. But it matters not one jot if only 1%(anecdotal?) are too attain though whatever means the goal that we refer to here. That to me and other radical socialists like Mark Carnegie(inheritance tax applied to the top 15%) see as being a structural inequity in need of redress.

Thoreau's broader sentiments in context, for anyone or everyone. You'll make the connection or you won't.
http://thoreau.eserver.org/walden1a.html

 

[sptrawler]

Phuket...Probably close to Patong. Lots of shopping there to keep the wife busy, but not too close so that its not peaceful.

CanOz

Phuket, is the dearest place in Thailand, check out Pataya.

 

[sptrawler]

While interest rates were higher, the price of property was much lower, and has been shown previously, the level of income devoted to mortgage repayments now are much higher than when you got to buy.

People need to stop using the past to justify investment in housing NOW.

Australian households CAN'T triple their debt levels again.

Australians HAVE gone back to their historical level of saving 10% of their income.

House prices CAN'T increase faster than wages growth unless you can encourage people to save less. I would say we're a good decade away from people feeling that comfortable to go on a debt binge again.

It's not relevant that you've got a mortgage free IP or primary residence, or both. What is relevant is what can realistically occur going forward, and as yet I've not seen any evidence to show that house prices in general can take off again. If anything, lower interest rates are making people more scared and more likely to save than to go out and borrow.

Hands up anyone who knows someone with a home loan who has decreased their repayments due to lower interest rates? None of my friends have done this. Everyone I know who has debt is keenly focused on repaying it as fast as they can now.

Interest rates were high in the 80's but people were conservative, "don't borrow more than rent payments if your unemployed" was the mantra of the day.
Due to tax breaks on housing everyone sees it as a license to print money, the government doesn't want a collapse in the building industry, the banks can't afford a collapse.
So the elastic band gets stretched further, sooner or later it breaks or someone has to release the tension.

 

[Bill M]

And just a couple of questions for those of you who complain so bitterly about how much harder it is for you:

1. Are you and your partner both prepared to work two jobs throughout the week, and then another throughout the weekend, in order to save for a substantial deposit on the first home, and then to pay off the mortgage more quickly? And continue doing this for years?

2. Are you both prepared to do without new clothes (barring footwear and underwear), all travel and holidays, all entertainment, meals out etc, until you reach your goal?

3. When you do finally get that house, are you prepared to have second hand furniture and appliances while you continue to save to pay out the mortgage?

4. Will you postpone having children in favour of continuing the above measures?

The above are just some of the choices we made.

I am glad you mentioned that Julia, we did the same and I can add a few too.

My wife worked full on 9 hour days then went to TAEF after work, got home at 8 PM, had dinner and a shower and off to bed early so she could wake up next day and do it all over again.

I was working shiftwork and on the changeover from day shift to night shift I spen the daytime working a second job.

Doing all the O/T i could get in order to pay off the mortgage ASAP rather than going to night clubs on a Friday night and buying $15 cocktails.

Living in a 1 bedroom unit many years before we could upgrade.

Scrounging around garage sales on a Saturday mornings to buy all those bits and pieces we couldn't afford new for the house.

I keep telling everyone, getting ahead means spending more time working hard and saving money and investing well. Nothing is free, hoping and wishing will not improve your financial situation.

 

[Mrmagoo]

Even today, after so much progress has been made in this regard, there is still not equality of income for women for similar work.

Thnx. I'll remind my boss to pay me more as I should be getting paid more than the women I work with. Awesome. I'm getting a raise !

 

[Mrmagoo]

I am glad you mentioned that Julia, we did the same and I can add a few too.

My wife worked full on 9 hour days then went to TAEF after work, got home at 8 PM, had dinner and a shower and off to bed early so she could wake up next day and do it all over again.

I was working shiftwork and on the changeover from day shift to night shift I spen the daytime working a second job.

Doing all the O/T i could get in order to pay off the mortgage ASAP rather than going to night clubs on a Friday night and buying $15 cocktails.

Living in a 1 bedroom unit many years before we could upgrade.

Scrounging around garage sales on a Saturday mornings to buy all those bits and pieces we couldn't afford new for the house.

I keep telling everyone, getting ahead means spending more time working hard and saving money and investing well. Nothing is free, hoping and wishing will not improve your financial situation.

Kay. All my folks had to do was work at Coles and somehow were able to afford to buy a house.

I'll let the bank know their mortgage payment calculators are in error as I can't see how to afford a property on a Coles salary !

 

[CanOz]

Phuket, is the dearest place in Thailand, check out Pataya.

Ooooh, yuk...old men and young Thais, Russians and filthy beaches...

Actually never been there, just what I've heard from the local expats...been to Phuket may times and there are some nice deals around rawai...

Cheers,


CanOz

 

[CanOz]

Kay. All my folks had to do was work at Coles and somehow were able to afford to buy a house.

I'll let the bank know their mortgage payment calculators are in error as I can't see how to afford a property on a Coles salary !

I can understand your POV magoo. I see it here in china easily. Young people haven't a hope of buying a property. All the wealthy and upper middle class are hoarding apartments...empty ones. There is simply not enough assets in which to park thier cash, so everyone else suffers. We were lucky, my wife's father was a builder and he was able to buy a place for us to live for 300,000 rmb....years ago, as they do for thier kids.

Good luck mate...

CanOz

 

[Bill M]

Kay. All my folks had to do was work at Coles and somehow were able to afford to buy a house.

I'll let the bank know their mortgage payment calculators are in error as I can't see how to afford a property on a Coles salary !

The Coles salary for a Service Assistant (checkout operator or shelf stacker) is currently $19.70 P/H not including Sundays which is $29.55 P/H. With 17.5% annual leave loading, a bit of O/T and some public holidays it can easily reach $42,000 P/A for a full time employee. That is roughly about $800 P/W gross.

Now even in an expensive area like the Northern Beaches of Sydney you can still buy a 1 br unit for 300K. Here is one just 5 minutes walk from the beach. http://www.realestate.com.au/property-unit-nsw-dee+why-112319279

Now how hard would it really be to save 29K for a deposit and borrow $260,000 and pay that off? According to UBanks calculator it would cost $1,455 P/M to pay off this loan at their current rate of 5.37%. $1,455 works out at $363 P/W. I can tell you now I would definitely be able to pay that off on my own even with a Coles salary. With a partner working as well it would be easier. Start small, work hard, be a bit frugal, save money, invest well and it will eventually all fall into place. If I was doing it all over again I would go this route which is the same route I took many years ago.

 

[Miss Hale]

Kay. All my folks had to do was work at Coles and somehow were able to afford to buy a house.

I'll let the bank know their mortgage payment calculators are in error as I can't see how to afford a property on a Coles salary !

I know what you mean. The baby boomers in my family were basically the same. One of them bought a 3 bedroom house in the eastern suburbs of Melbourne and made the mortgage payments each month with money left over.

Maybe some people had to struggle but that wasn't the norm and I don't think when we talk about housing affordability we should have as the benchmark two people working two jobs each and living on the smell of an oily rag in order to make the mortgage repayments. Nor should we encourage people to take out motgages that are more than 5 times their annual income.

 

[Miss Hale]

The Coles salary for a Service Assistant (checkout operator or shelf stacker) is currently $19.70 P/H not including Sundays which is $29.55 P/H. With 17.5% annual leave loading, a bit of O/T and some public holidays it can easily reach $42,000 P/A for a full time employee. That is roughly about $800 P/W gross.

Now even in an expensive area like the Northern Beaches of Sydney you can still buy a 1 br unit for 300K. Here is one just 5 minutes walk from the beach. http://www.realestate.com.au/property-unit-nsw-dee+why-112319279

Now how hard would it really be to save 29K for a deposit and borrow $260,000 and pay that off? According to UBanks calculator it would cost $1,455 P/M to pay off this loan at their current rate of 5.37%. $1,455 works out at $363 P/W. I can tell you now I would definitely be able to pay that off on my own even with a Coles salary. With a partner working as well it would be easier. Start small, work hard, be a bit frugal, save money, invest well and it will eventually all fall into place. If I was doing it all over again I would go this route which is the same route I took many years ago.

That 1 bedroom unit is more than 7 times that person's annual salary. Housing affordability is when you can buy a house for less than 5 times your annual salary (ideally about 3 times your annual salary).

No one is saying it can't be done but some of us are arguing that housing was more affordable for the baby boomers and - generally speaking- they had it easier.

 

[againsthegrain]

As usual apples and not being compared with apples.

It is a fact back in the 90s it was possible to buy a house with land and pay it off in 10years working hard.

It is not possible to buy a house with land now and pay it off in 10years working now.

You can buy a shoebox 1 bedroom apt with no land, body corporate and no chance of future growth. Pay it off in 15 years working like a dog.

Times have changed, populations have increased, greed, inflation, tax all up also. It will never be the same situation NOW compared to when the baby boomers were around. They like to tell stories of how HARD they did it. Not saying it was all handed on a plate for them, but its easy to sit back and say rather then do.

 

[shag]

Mrmagoo, you make some very good points.

Having said that, I disagree with your assessment of the perpetrators.

Housing investors are mere pawns in a much larger game.

Where do you think the money comes from?

Fiat money, the only unlimited resource on earth.

i agree too. its become a real scurge on society. pure greed. unlike shares, you are just pushing a ponzi scheme and not growing wealth.
a mate in 90, just post eng school, was onto his 3rd dorkland property when we visited his region. they identified through dwelling there, that it was a sure thing ie the nations econ. capital, a grt harbour and geographic settup, with the vital very limited supply of land.
in hindisight it was obvious where he was even tho we all purchased just post uni as hard as we could in our regions.
the several booms since then would mean a single of their properties would outstrip anything he could earn over a lifetime if he was on a standard prof. engineering salary, let alone the whole array of dwellings they must own by now.
look at the blue chip saga if you want to see the worst of overt property greed and bubbles. note the bankrupt is practising and living the hi life here now to escape the bankruptcy laws and aggrieved investors.

sydneys a similar market, so i dont see it breaking. look at kennas bondi pic...on a bad day....too. theres endless asian monies to soak up the joe bloggs whos gone from an affordable job decades ago, to a present value of several million. just look at the large swiss grand development and its virtual sellout within hours. a quality product for good dosh.

i know someone who has three good properties for various reasons, ones a huge time and dosh chewer, the other-a rental, barely breaks even given the overt property management costs. over the ditch has less restrictions than here, ie taxes, thus drives more greed. try 3k for a blocked drain, hundreds for a simple toilet cistern job....
grow, not clip the ticket.

 

[sydboy007]

The price of property was then relatively proportionate to income levels.
Perhaps consider when you state that "the level of income devoted to mortgage repayments are (sic) now much higher than you got to buy", what women earned was massively less than the income of men. Even today, after so much progress has been made in this regard, there is still not equality of income for women for similar work.

And just a couple of questions for those of you who complain so bitterly about how much harder it is for you:

1. Are you and your partner both prepared to work two jobs throughout the week, and then another throughout the weekend, in order to save for a substantial deposit on the first home, and then to pay off the mortgage more quickly? And continue doing this for years?

2. Are you both prepared to do without new clothes (barring footwear and underwear), all travel and holidays, all entertainment, meals out etc, until you reach your goal?

3. When you do finally get that house, are you prepared to have second hand furniture and appliances while you continue to save to pay out the mortgage?

4. Will you postpone having children in favour of continuing the above measures?

The above are just some of the choices we made.

Needing to make those kinds of choices, sorta shows how out of whack house prices have become. Makes me remember in Sicko when George Bush is talking to the lady who has to work 3 jobs just to make ends meet. What you describe is not living, more along the lines of existing.

We seem to forget the economy is meant to serve us, not we to serve it.

But in some ways you've made my point. I'd argue with today's property market people would be better off earning a bit less, have the time to enjoy each others company, spend time with the kids, and do their long term saving in an alternative way to the Aussie tradition of paying off a mortgage.

I look at a couple I know. Husband is an accountant, wife runs a consultancy business. They used to live in a lovely penthouse in the city, but when the kids came along they decided to rent it out and they bought a house not far away and renovated it. So they have a mortgage debt around the $2M mark. They're not struggling by any means, but on a recent visit I was having a chat with the oldest boy of 5 and he sorta let slip that he misses the time he used to get with his parents, but now they're working so much. Economically the kids will have it all, including a good private school education, but I think having the time with parents is probably just as valuable, probably more so. Good parents will give you the moral compass to navigate life.

So kudos to you for going through what you did to get where you are, but I don't think we as a society should aspire to requiring everyone to do the same to have a decent life.

 

[sydboy007]

Interest rates were high in the 80's but people were conservative, "don't borrow more than rent payments if your unemployed" was the mantra of the day.
Due to tax breaks on housing everyone sees it as a license to print money, the government doesn't want a collapse in the building industry, the banks can't afford a collapse.
So the elastic band gets stretched further, sooner or later it breaks or someone has to release the tension.

Don't say it's so. Are you starting to agree with my argument that the halving of the capital gains tax has something to do with this

 

[Julia]

It might be just me, but I don't believe that for a second!

Your choice. Immaterial to me. Were you in NZ in the 70's and 80's?

As usual apples and not being compared with apples.

It is a fact back in the 90s it was possible to buy a house with land and pay it off in 10years working hard.

It is not possible to buy a house with land now and pay it off in 10years working now.

That's a wide statement. Why not start with something less than a house with land? As Bill suggested, make a start on home ownership, if that's what you want, with a small apartment in a suburb you aspire to move on from? He has given you an example of the figures.
All the new houses I see these days have at least four bedrooms, a media room, two living areas, two bathrooms or more, double garage, maybe a pool. You actually don't need all that at the start with its attendant mortgage commitment.

Times have changed, populations have increased, greed, inflation, tax all up also.

Definitely agree about the greed in particular. You don't mention that wages are also up, of course.

It will never be the same situation NOW compared to when the baby boomers were around. They like to tell stories of how HARD they did it. Not saying it was all handed on a plate for them, but its easy to sit back and say rather then do.

Um, "say rather than do"???? We did it.

Needing to make those kinds of choices,

We all make choices all the time. It was just that - a choice. The aim was to have a fully paid off house asap.
Later it was to be able to retire well before retirement age, with financial independence. Having done that, I have no regrets whatsoever. It was absolutely worth it to have the peace of mind now.
Given that it's going to become increasingly difficult for governments to fund an age pension at anything like a comfortable level, I wouldn't like to be dependent on it, especially when the age demographic factors mean good healthcare is probably also going to have to be largely self funded also.

What you describe is not living, more along the lines of existing.

As I said, it was a choice. We had a goal, and then later I had my own goal, and that mattered more than exotic holidays and designer clothes. If others make different choices, then that's fine and entirely their business, but please don't complain that it's impossible to get into basic home ownership. It's all a matter of what your priorities are. I think attitudes were different a generation ago. There was a general acceptance that you sacrificed some of the fun stuff for a longer term goal. There was probably also more DIY where possible, eg
we laid our own driveway, built the garage with family help etc.

We seem to forget the economy is meant to serve us, not we to serve it.

Certainly, but the individual can't do much to control the overall economy, therefore has to make decisions within the reality of what is.

So kudos to you for going through what you did to get where you are, but I don't think we as a society should aspire to requiring everyone to do the same to have a decent life.

Of course not, and you make good points about family life. We had no children.

 

[DocK]

That 1 bedroom unit is more than 7 times that person's annual salary. Housing affordability is when you can buy a house for less than 5 times your annual salary (ideally about 3 times your annual salary).

No one is saying it can't be done but some of us are arguing that housing was more affordable for the baby boomers and - generally speaking- they had it easier.

I do wonder how my kids are going to fare with the home ownership dilemma - although several years off.

I'm not going to provide links, stats etc to substantiate, so take it or leave it, but from my own experience:

When the spouse and I, and most of our similarly-aged friends, bought our first properties back in the late '80s to early 90's - our purchase prices were approx 1.5 to twice our combined annual gross incomes. My first home cost $87,000 and we were earning about $65,000 gross combined at the time. The average wage then was $24,200 according to the ATO (google it yourself if you want). It was a modest home, small house on a small block in an average suburb of the Gold Coast. Interest rates were 17% at the time - it was during the "recession we had to have". That same house would now sell for approx $420,000, (I checked realestate.com.au) so to be comparable in terms of affordability the average wage would need to be $120,000 pa. According to ATO it's more like $70,000 - $80,000, so if you assume $150K combined that makes the same house a factor of 2.8 x comb ave gross income, rather than the 1.74 x comb gross ave income it was back then. This is relevant in my area - I assume the difference is greater in Syd & Melb etc.

In summary, I do think affordability was easier for my generation, and the one before it, if you use the ave gross wage of the time as your guide.

Whilst acknowledging that home ownership is entirely possible if you wish to make the sort of choices a couple of posters have outlined - I doubt that many would want to exist that way, and it's certainly not a way of life I'd like to see my kids live. I've seen too many friends and relatives die before they get the chance to enjoy the fruits of their labour to advocate half living your life in the present. Not many people lie on their deathbed and wish they'd saved more money or worked longer hours, but quite a few regret the lack of time spent with loved ones, or the experiences not enjoyed and places never visited.

I think the number of children a family has makes a huge difference to its ability to afford housing also. It's much easier for a DINK couple to buy a home, than for one with a few children, especially if private schooling is chosen. Again, it's a choice - but many people would put having their children waaay in front of owning their home. I guess it's just a matter of priorities. It's not just a case of what is possible, but what is desirable. If owning means a substantial decline in lifestyle, more and more people will choose to rent instead. At the end of the day there's a limit to how much young people will be prepared to pay for a roof over their heads.